Cognizant Technology Solutions Corp., a US-based information technology (IT) firm with most of its employees working out of India, expects its business growth in the Asia-Pacific region to outpace the company average this year, maintaining the trend seen in recent years, Jayajyoti Sengupta, vice-president and Asia-Pacific head, said in an interview.
Automation, which includes robots, machine learning and artificial intelligence, will be among the new frontiers for Cognizant, as rote and repetitive processes become “digital, instrumented, analyzed and intelligent”, he said.
Cognizant has said it expects its revenue growth to slow to between 10% and 14.3% for the calendar year 2016. How do you see the situation in the Asia-Pacific?
It would be pertinent to note that Cognizant’s growth of 21% in calendar 2015 included revenues from the acquisition of TriZetto. In 2015, our “rest of the world” revenues, which include those from the Asia-Pacific region as well as the Middle East, grew 29.9%, significantly higher than the company average. Because of the lower revenue base, and higher investment and pipeline of deals in the Asia-Pacific region, we believe this region will continue to grow above company average as has been the case for the past several years.
Cognizant recently announced a partnership to develop Blockchain solutions for secure record-keeping of documents for Japan’s Mizuho Financial Group Inc. Could you share more details on what the partnership means for the company?
We help our clients become digital enterprises. In this endeavour, Blockchain presents an opportunity to rethink how various business processes might work more efficiently going forward. Our vision is to enable our clients to identify and incorporate a decentralized architecture wherever applicable to cut costs and develop new growth opportunities using distributed ledger technologies. Financial services and other organizations often have difficulty in ensuring execution against the most recent versions of documents and in verifying the authenticity of those documents. With Blockchain’s decentralized document verification, they can easily share verified documents with third-party requestors, and speed up verification by multiple parties. As part of the deal with Mizuho Financial Group announced earlier this year, we will bring together our extensive financial services, consulting and digital technology expertise to design and develop a Blockchain solution for secure record-keeping of documents among Mizuho’s group firms. The solution will allow them to exchange and sign sensitive documents in a secure and transparent manner.
In each of the last five years, Cognizant’s banking, financial services, insurance (BFSI) practice has grown at over 15%. You have a huge lead of Indian IT firms in that space on account of your robust consulting practice. How do you see the company maintaining this edge going forward?
Becoming a digital enterprise is now a necessity, a matter of survival, as businesses, products, people and devices become more connected. Clients, including those in the financial services sector, are looking for innovative ways to combine their traditional business models and product sets with new and continuously evolving digital technologies. IT is a means not just to drive productivity and efficiency—what we refer to as “run better”—but also reimagine organizations and business models for future growth, what we call “run different”. This is what we refer to as the dual mandate. Effectively addressing the dual mandate for clients requires partners that can combine strategy, technology and business consulting in one integrated model. It also requires a partner that has a deep understanding of clients’ legacy environments and business processes so that these can be leveraged and integrated into new digital backbones. Our strength in the market comes from the fact that we have built this breadth of capabilities at Cognizant and we’ve integrated these together in our Cognizant Digital Works methodology for maximum client impact. We are among the few companies that can provide comprehensive digital innovation at an enterprise scale. Our matrix structure deeply integrates our consulting team with our technology and business process services delivery organization. This synergy between our consulting and delivery organizations helps the teams to work closely, driving business model change, the re-engineering of business processes and organizational change management for our clients’ businesses.
What are the trends in the IT outsourcing space in South-East Asia and the Asia-Pacific? How divergent are these from trends in the West?
The APAC market is poised well to benefit the best from fulfilling the dual mandate to “run better” and “run different”. Clients who have been partnering with IT and business process firms for a few cycles are in a great position of advantage to generate efficiencies from their ongoing engagements and thereby savings that can be directed towards digital transformation and other business initiatives. At the same time, we are also seeing enterprises making the big leap directly towards adopting digital initiatives. One area that clients in Asia are laying particular emphasis on is around proximity delivery. Overall, the outsourcing space is bustling with action and we are seeing a healthy mix of conventional technology services together with emerging ones such as platform-based services, automation and next-generation IT.
How are you positioned in the two key markets of China and Japan? How do you see these two markets going forward to Cognizant?
We have been operational in both China and Japan for nearly a decade now and seeing great opportunities there. In both markets, we have been successful in associating with strategic customers in strategic areas such as digital marketing, where we can help clients gain competitive differentiation. For us, China and Japan are important for sourcing talent.
We are in Japan for the long term and continue to invest there. Our strategy in Japan is to not just grow our business organically with MNCs (multinational companies) and local Japanese customers, but also to work closely with local partners to deepen understanding of Japanese market requirements and sharpen onsite service delivery and Japanese language capabilities. In addition, we have entered into strategic alliance partnerships with global product partners to utilize their specific solutions for our Japanese customers.
We will continue to focus on Japanese MNCs as our primary targets to help them leverage advanced technology architectures to drive business transformation and global expansion. Apart from servicing dozens of clients from our development centre in China, we are also making investments to capitalize on China as a market. Cognizant serves four categories of clients from China: US and European clients; Chinese subsidiaries of MNCs; clients in Japan—because of cultural and linguistic similarities—and local Chinese clients.
You identified BSFI early, and also built digital capabilities, and rode these segments. What are such new-age sectors that the company is betting on? Automation, artificial intelligence (AI)?
As the industrial economy makes way for the digital economy, the role of technology is shifting from supporting business to being its lifeblood. To be able to transform successfully to a new digital economy, enterprises need a new business and IT architecture to help them drive innovation and efficiency at scale as well as provide flexibility for designing new business processes. Just consider how traditional companies are now under threat. Betterment, a robo-advisor platform for wealth management, was only founded in 2008 and already has $3.5 billion under management.
Now, this pales in comparison to the big traditional banks, but it’s clear the game is changing. Robots, machine learning, AI, IoT (Internet of Things), 3D printing—so many buzzwords surround automation, but all point to the same theme: rote and repetitive processes are becoming digital, instrumented, analyzed and intelligent—and increasingly operated by smart machines instead of solely by humans. The digital platform in an example like Betterment is the key because it includes software AI, algorithms, data sources, people, connectivity, an always-on infrastructure—and in that sense, it is “born automated” from the outset. The output is enhanced customer experiences and an organization able to make better decisions about future products and services.
The need for efficiency, lower error rates, lower costs and faster throughput will drive aggressive adoption of automation. While these outcomes are welcome, the true value of digitization lies in the rich data and metadata that accumulates around process value chains, which will be further enhanced with the emergence of new technologies such as machine learning, deep learning and AI in the coming years—this is when the real transformation can begin. The underlying theme of this transformation is that technology will be far more prevalent in the coming years, and that provides large players like us a great opportunity to make meaningful and lasting contributions to solving some of the most pressing and significant societal and business problems. We are building capabilities to enable our clients to drive digital transformation at scale. Our Cognizant Digital Works approach, which combines strategy, design, technology and business consulting in one integrated model, is solid and showing results. Our focus is on scaling the capability quickly across the world. We are evolving our IT services capabilities to enable our clients to create next-generation technology infrastructures that are characterized by high levels of operational efficiency at the back-end, and enhanced by new digital capabilities on the front-end. Our market opportunities are substantial.
Do you see automation as a double-edged sword for firms as it can cannibalize existing business, while at the same time increase profitability?
We help smart robots complement smart people, and we call this Intelligent Process Automation (IPA). IPA is enabled by a powerful, proprietary framework of technology, methodology, best practices and tools, and integrated analytics, and aligned to address functional processes across industries and horizontal functions. Today, we can support entire business processes, inclusive of the underlying IT infrastructure and platforms, and have created utility or BPaaS (business process-as-a-service) models that efficiently harness the power of automation, to drive more effective processes through analytics. Our ability to deploy IPA solutions quickly and with depth of expertise and scale in vertical industry functions, allows our customers to become agile at scale—without adding significant resources. Our view is that in aggregate, IPA won’t supplant knowledge labour as much as work in tandem to make smart humans smarter and businesses more agile. IPA allows for the automation of front, middle and back office processes typically performed by teams of people accessing multiple applications and following defined, rules-based guidelines. With IPA, these same teams of people are now supported and empowered by smart robots and achieving ever-greater levels of performance and innovation. Automation becomes a fundamental enabler, working powerfully in tandem with humans, to drive not only new levels of process efficiency, but to tackle business challenges differently, like never before.
As all IT firms look to new markets such as China, Japan, and South-East Asia, will it lead to a scenario, where there will be an oversupply of services, coupled with the declining demand? Already, BFSI segment’s demand for IT/BPO services is slowing, and there is an oversupply of competitors vying for the business, driving down prices, profit margins and revenue growth.
Each of these individual markets in the Asia Pacific region is big and diverse. Enterprises in these markets are re-examining how they operate, moving from merely incremental levels of performance efficiency to building new digital business capabilities. The only way for businesses to adapt in this new era is to simultaneously improve efficiency and scale with existing systems, while driving business innovation through newer technologies. This presents significant opportunities for service providers such as Cognizant. As in other markets and industries, a healthy competition and mix of capable providers will deliver the best business results to APAC customers. As digital technologies put industries and businesses at a crossroads, innovation cycles have compressed dramatically. Clients need a partner who has the ability to integrate and execute end-to-end transformations driving both efficiency and innovation. There will be a clear bifurcation of service providers in these markets and those who cannot compete on both sides of the dual mandate will try to compete on volume and price. However, going by what has happened during previous big technology shifts, notwithstanding isolated instances of irrational pricing over the short term, overall pricing will remain largely stable and value creators will be able to build deeper roots in the market. Our deep industry, process, legacy and transformative digital knowledge, our integrated Cognizant Digital Works model combining strategy, design, technology and business consulting, and global footprint affording access to the best talent across the world will continue to gives us an edge in these markets as well.